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  • HC-1 HC-1 Board’s Overall Responsibilities

    • HC-1.1 HC-1.1 Responsibilities of the Board

      • HC-1.1.1

        The board of directors (“Board”) of the licensee must:

        (a) Set the “tone at the top” and play a leading role in establishing the licensee’s corporate culture and values, and oversee management’s role in fostering and maintaining a sound corporate and risk culture;
        (b) Ensure that no individual or group of directors dominates the Board’s decision-making and no individual or group has unfettered powers of decision.
        (c) Approve and oversee the development of the licensee’s strategy, business plans and budget, and monitor their implementation. Bahraini Islamic bank licensees must submit to the CBB for its review their proposed strategy and any major proposed changes to it;
        (d) Actively engage in the affairs of the licensee, keep up with material changes in the licensee’s business and the external environment and act in a timely manner to protect the long-term interests of the licensee;
        (e) Convene and prepare the agenda for shareholder meetings;
        (f) Approve, and oversee the implementation of, the licensee’s governance framework, risk management framework and all policies, and review the relevant parts of these as well as review key controls in case a new business activity is considered, or in case of material changes to the licensee’s size, complexity, business strategy, markets or regulatory requirements, or the occurrence of a major failure of controls;
        (g) Establish, along with senior management and the chief risk officer, the licensee’s risk appetite, considering the licensee’s strategy, competitive and regulatory landscape, the licensee’s long-term interests, risk exposure and ability to manage risk effectively, and oversee the licensee’s adherence to the risk appetite statement, risk policy and risk limits;
        (h) Ensure that:
        i. Adequate systems, controls, processes and procedures are implemented by senior management in line with the Board approved policies;
        ii. The licensee has adequate processes to ensure full compliance with the requirements of the CBB Law, other relevant laws and the pertinent rulebooks;
        iii. The licensee has a robust finance function responsible for accounting and financial data;
        iv. The risk management, compliance and internal audit functions are properly positioned, staffed and resourced and carry out their responsibilities independently, objectively and effectively; and
        v. Senior management maintains an effective and transparent relationship with the CBB;
        (i) Approve the annual and interim financial statements;
        (j) At minimum, approve the selection and oversee the performance of the chief executive officer (CEO), chief financial officer and heads of the risk management, compliance and internal audit functions;
        (k) Actively oversee, with the assistance and advise of the Remuneration Committee, the remuneration system’s design and operation for approved persons and material risk-takers and monitor and review executive compensation and assess whether it is aligned with the licensee’s remuneration policy, risk culture and risk appetite; and
        (l) Consider the legitimate interests of depositors, shareholders and other relevant stakeholders in their decision-making process.
        Added: April 2023

      • HC-1.1.2

        The Board may, where appropriate, delegate some of its functions, but not its responsibilities, to the Board committees.

        Added: April 2023

      • HC-1.1.3

        The members of the Board must exercise their fiduciary and other duties of care, candor and loyalty to the licensee in accordance with local laws and regulations.

        Added: April 2023

      • HC-1.1.4

        Each director must:

        (a) Understand the Board’s role and responsibilities pursuant to the CBB Rulebook, the Commercial Companies Law and any other laws or regulations that may govern their responsibilities from time to time;
        (b) Consider themselves as representing all shareholders and must act accordingly; and
        (c) Ensure that they receive adequate and timely information before each meeting and must study it carefully.
        Added: April 2023

    • HC-1.2 HC-1.2 Corporate Culture and Values

      • HC-1.2.1

        In order to promote a sound corporate culture, the Board must:

        (a) Approve an appropriate code of conduct/ ethics that must outline the acceptable practices that all Board members, senior management and other staff must follow in performing their duties, and the unacceptable practices/ conduct that must be avoided;
        (b) Set and adhere to corporate values that create expectations that the business must be conducted in a legal, professional and ethical manner, and oversee the adherence to such values by Board members, senior management and other employees;
        (c) Promote risk awareness within a strong risk culture, convey the Board’s expectation that it does not support risk-taking beyond the risk appetite and risk limits set by the Board, and that all employees are responsible for ensuring that the licensee operates within the established risk appetite and risk limits;
        (d) Ensure that the corporate values, professional standards and codes of conduct it sets, together with supporting policies, are adequately communicated throughout the licensee; and
        (e) Ensure that all directors, senior management and other staff are aware that appropriate disciplinary or other actions will follow unacceptable behaviour, practices and transgressions.
        Added: April 2023

      • HC-1.2.2

        Employees must be encouraged and be able to communicate, confidentially and without the risk of reprisal, legitimate concerns about illegal, unethical or questionable practices. This must be facilitated through a well communicated and Board approved whistleblowing policy and adequate procedures and processes, consistent with applicable laws. This includes the escalation of material concerns to the CBB.

        Added: April 2023

      • HC-1.2.3

        The Board must:

        (a) Have oversight of the whistleblowing policy mechanism and ensure that senior management addresses legitimate issues that are raised;
        (b) Take responsibility for ensuring that staff who raise concerns are protected from detrimental treatment or reprisals, and that their rights are not undermined;
        (c) Approve and oversee how and by whom legitimate material concerns shall be investigated and addressed such as by an objective and independent internal or external body, senior management and/or the Board itself; and
        (d) Ensure that, after verifying the validity of the allegations, the person responsible for any misconduct is held accountable and is subjected to an appropriate disciplinary measure.
        Added: April 2023

      • HC-1.2.4

        The Board must establish a conflict of interest policy on identifying and managing potential conflicts of interest related to all approved persons. The policy must include:

        (a) An approved person’s duty to:
        i. Avoid, to the extent possible, activities that could create conflicts of interest or the appearance of conflicts of interest. An approved person shall be considered to have a “personal interest” in a transaction with a company if they themselves, or a member of their family (i.e. spouse, father, mother, sons, daughters, brothers or sisters), or another company of which they are a director or controller, are a party to the transaction or have a material financial interest in the transaction or are expected to derive material personal benefit from the transaction (transactions and interests which are de minimis in value should not be included);
        ii. Promptly disclose any matter that may result, or has already resulted, in a conflict of interest;
        iii. Abstain from getting involved in or voting on any matter where they may have a conflict of interest or where their objectivity or ability to properly fulfil duties to the licensee may be otherwise compromised. Any decision to enter into a transaction in which an approved person appears to have a material conflict of interest must be formally and unanimously approved by the entire Board;
        iv. Act with honesty, integrity and care for the best interest of the licensee and its shareholders and other stakeholders;
        v. Not use properties of the licensee for their personal needs;
        vi. Not misuse or misappropriate the licensee’s assets or resources;
        vii. Not disclose confidential information of the licensee or use it for their personal profit or interest;
        viii. Make every practicable effort to arrange their personal and business affairs to avoid a conflict of interest with the licensee;
        ix. Not take business opportunities of the licensee for themselves; and
        x. Not compete in business with the licensee or serve the licensee’s interest in any transaction with a company in which they have a personal interest.
        (b) Examples of where conflict of interest may arise when serving as an approved person;
        (c) A rigorous review and approval process for approved persons to follow before they engage in certain activities (such as serving on another Board) so as to ensure that such activity will not create a conflict of interest;
        (d) Adequate requirements that transactions with related parties must be made on an arm’s length basis;
        (e) Sufficient restrictions on and/or a robust and transparent process for the employment of relatives of approved persons;
        (f) Requirements for properly managing and disclosing conflict of interest that cannot be prevented;
        (g) Requirements for all approved persons to annually declare in writing all their other interests in other enterprises or activities (whether as a shareholder of above 5% of the voting capital of a company, a manager or other form of significant participation) to the Board or a designated Board committee; and
        (h) The way in which the Board will deal with any non-compliance with the policy.
        Added: April 2023

      • HC-1.2.5

        Where there is a potential for conflict of interest, or there is a need for impartiality, the Board must assign a sufficient number of independent Board members capable of exercising independent judgement, to address the conflict.

        Added: April 2023

      • HC-1.2.6

        The CEO/General Manager of the licensee must disclose to the Board of directors on an annual basis those individuals who are occupying controlled functions and who are relatives of any approved persons within the licensee.

        Added: April 2023

    • HC-1.3 HC-1.3 Oversight of Senior Management

      • HC-1.3.1

        The Board must exercise proper oversight of senior management against formal performance and remuneration standards consistent with the long-term strategic objectives and the financial soundness of the licensee. In doing so, the Board must:

        (a) Meet regularly with senior management;
        (b) Subject senior management to annual performance assessment and document such assessments;
        (c) Ensure that approved persons’ collective knowledge and expertise remain appropriate given the licensee’s nature of business and risk profile;
        (d) Ensure that senior management’s actions are in full compliance with applicable laws and regulations and consistent with the strategy, business plan and policies approved by the Board, including risk appetite;
        (e) Question, challenge and critically review the explanations and information provided by senior management; and
        (f) Ensure that appropriate succession plans are in place for all approved persons within senior management (provided that such plans are subject to review in case of any changes to approved persons within senior management).
        Added: April 2023